Competition in South African Banking An assessment using the Boone Indicator and PanzarRosse approaches

This paper uses the Boone indicator and the Panzar-Rosse H-statistic to assess competition in the South African banking sector. Results point to substantial exercise of market power by South African banks. More precisely, we nd evidence of monopoly or cartel tendency when using either the Boone indicator or the Panzar-Rosse approaches. The results are robust to different model specications. We thus conclude that over the period 20082018, the nature of conduct by South African banks was monopoly in the sense that banks market shares or revenues are little affected by the behaviour or actions of other banks. Given the role of banks in the transmission of monetary policy, and for economic growth more generally, the weak competition in the sector may have negatively affected the efcacy of monetary policy during this period, and may partly explain South Africas weak economic growth performance post the GFC.